[ESB16] Economic Survey → Budget-2016→Fiscal Capacity, Direct-Indirect Taxes, PoEM, Voluntary Disclosure of Black Money

1. Prologue
2. ESB162/P01: Fiscal capacity- meaning, implications, how to raise it?
3. ESB162/P02: Consolidated Fund, Contingency Fund & Public Account
4. ESB162/P03: Direct Taxes- IT, Corporation Tax, MAT, DDT, CGT, STT in Budget-2016
5. ESB162/P04: Panama Papers, PoEM, Voluntary Black money disclosure
6. ESB162/P05: Indirect taxes: TCS, Krishi Kalyan Cess, Infra Cess, Gold Excise

Prologue

• Directly jumping to budget (pillar#2). Reason- finance portion of pillar#1 has hardly half lecture worth developments. Will come that Pillar#3 BoP (which is again hardly half lecture worth new development).
• Powerpoints available under Mrunal.org/download (goto mediafire folder=>Economy=>Budget)

ESB162/P01: Fiscal capacity- meaning, implications, how to raise it?

• Fiscal Capacity is the ability of the government to generate revenue from households and industries. The latest economic survey has observed that India is less than its desirable level. This first part of the lecture covers why is this happening and what are the remedies?
• Democracy is contract between states and citizen – taxation serves as the economic glue that binds them together.
• But when government is more focused towards redistribution of wealth rather than providing quality essential public services, then uppermiddle class and rich people will either become free riders or exit from the public system. What are the negative consequences when this happens?
• Hardly 4% of the Indian voters are taxpayers, compared to about 90% in Norway Sweden and Netherlands. What are the negative consequences of this anomaly in human development of India?
• Why do USA and UK have higher fiscal capacity than India, despite the fact that they are also democracies?
• Three reforms suggested by the economic survey improve the fiscal capacity of India 1) don’t raise the income tax ceiling. 2) reduce leakages in subsidies and tax exemption 3) build a robust property tax regime.
• Goods and services tax – GST will improve the fiscal capacity of India but will play limited role in improving the democratic accountability of the states- says the economic survey, why?

Youtube Link: https://youtu.be/FyyBrwXLThA

ESB162/P02: Consolidated Fund, Contingency Fund & Public Account

• Theory recap: Consolidated fund of India, public account of India and contingency fund: the components and procedures related to withdrawal of money from them
• controller general of accounts belongs to which department of finance ministry?
• The two components of appropriation Bill –1) demand of grant. 2) charged expenditure
• difference between vote on account and interim budget

Youtube Link: https://youtu.be/GDkxXUL5z9E

ESB162/P03: Direct Taxes- IT, Corporation Tax, MAT, DDT, CGT, STT in Budget-2016

• the list of past and present direct/indirect taxes of the union and the States, their merits-demerits and descending order of collection amount.
• Brief look at the tax /revenue projections from the annual financial statements of Gujarat, Bihar and the and Madhya Pradesh.
• Revenue shortfall in the financial year 2015-16
• budget 2016: income tax slabs, tax rebate, cess and surcharge provisions
• understanding the difference between cess and surcharge.
• Why Additional dividend distribution tax introduced in budget 2016?
• Budget-2016: corporation tax on various types of companies.
• Statutory tax vs effective tax rate, revenue shortfall, tax Expenditure.
• Minimum Alternate Tax (MAT) and its application on foreign companies
• Securities transaction tax (STT), Capital Gains Tax (CGT)- new provisions in Budget-2016

Youtube Link: https://youtu.be/y4btIyDCli8

ESB162/P04: Panama Papers, PoEM, Voluntary Black money disclosure, Tax Litigation reduction in Budget-2016

• Geography: Location of Panama in World Map, Suez Canal and Panama Canal.
• What is “Panama Papers” controversy?
• Global measures to combat tax evasion and tax avoidance- OECD: Base Erosion and Profit Shifting (Beps), Automatic Exchange of Information (AEOI); USA: Foreign Account Tax Compliance Act (Fatca), FATF: Financial Action Task Force and India
• Income disclosure scheme for domestic tax payers and Krishi Kalyan Surcharge.
• Measures taken in budget 2016 to reduce tax litigation in both direct and indirect taxes
• E-Sahyog and E-Assessment in income tax
• Justice (retired) R.V. Easwar- Expert Committee to simplify income tax laws and TDS reduction in Budget-2016 to increase the cash flow to small taxpayers
• relief to foreigners in budget 2016 – no more harassment over retrospective tax, GAAR and place of effective Management (PoEM) to be implemented from 1 April 2017

Youtube Link: https://youtu.be/02A5OE2ECb4

ESB162/P05: Indirect taxes: TCS, Krishi Kalyan Cess, Infra Cess, Gold Excise in Budget-2016

• Budget-2016: excise, service and customs duty- various provisions, cess and surcharge.
• Measures taken in excise and customs to boost make in India project
• justification is behind the position of one percent excise duty on gold and other non-silver jewelry
• reasons behind imposition of 1% tax collection at source (TCS) while purchasing cars above Rs.10 lakh and cash payment above 2 Lakh
• Service tax: negative list and exempted list.
• Why is Central board of Excise and Customs (CBEC) demanding Rs.75 crores from SEBI as service tax?
• Gross tax revenue versus net tax revenue.
• Nontax revenue receipts of the union government: profit in this dividend, grass received, payment for various services.
• Sources of income for the reserve bank of India (RBI), and RBI’s dividend to union government.

Youtube Link: https://youtu.be/UMd3ZjCk4Aw
Next lecture: Capital part of the budget-2016.